Explicit coding for Transversality Condition in Model Block

General DSGE Modeling
1

Hi,

I have been learning Dynare and I realised that the transversality condition is never coded explicitly into the model block. It seems only the optimal conditions are necessary to be inputted in the model block. Is that because the transversality condition is already taken into account in the background?

Second question, what about the no-ponzi condition? How can I add it to my model? Or is that not necessary like the transversality condition?

I thank you for your time in advance.

Sincerely,
San

2

Both the TVC and the no-Ponzi condition are required to rule unbounded solutions. That is what the Blanchard-Kahn conditions check: whether there is a unique bounded solution. It’s at this stage where they enter implicitly to compute the solution. You don’t need to include them in the model explicitly.

3

Thanks! Very helpful.